INTERNATIONAL
New tariff schedule announced by the Trump administration in early August: the 10% floor rate remains in place for countries with a bilateral trade deficit with the United States, i.e. most countries in Latin America, Africa and the Middle East, as well as Singapore. Brazil is the major exception in this category (reciprocal customs duties of 50% announced in July). Countries with a trade surplus with the United States are subject to tariffs ranging from 15% to 50%, depending on negotiated agreements, imbalances in bilateral trade and diplomatic relations. Switzerland has been assigned one of the highest rates at 39% (gold exports are exempt, however); a rate of 15% will be applied to EU member states, Japan, South Korea and Turkey, and 19%-20% to the main ASEAN countries and Taiwan. India is facing a 25% tariff, which could be increased by another 25% at the end of August if no agreement is reached. South Africa is keeping its 30% tariff. Trade truces and negotiations are continuing for China (current tariff of 30%) and Mexico (25% for goods traded outside the USMCA). New sector-specific tariffs are still being considered for semiconductors and the pharmaceutical industry, while Donald Trump has announced an investigation into the furniture sector.
ADVANCED ECONOMIES
UNITED STATES
Rate cuts set to resume. In his speech in Jackson Hole last Friday, J. Powell opened the door to a rate cut at the mid-September FOMC meeting (see our Editorial). The data suggest a rebalancing of risks towards the employment component of the Fed's dual mandate. Job growth figures came in significantly lower than expected in July (73k, consensus: 106k), a figure accompanied by significant downward revisions for May/June (total of -258k), even though the combined downward pressure on labour supply is keeping the market broadly in balance, with an unemployment rate of 4.2% in line with full employment estimates. At the same time, core inflation (+3.1% y/y, +0.1pp) and producer prices (+3.3% y/y, +0.9pp) were rising. The latest macroeconomic indicators showed no positive momentum. July ISMs were down (-1.5pp to 48.0 for manufacturing, -0.7pp to 50.1 for services), as were industrial production (-0.1% m/m) and the University of Michigan consumer sentiment index, which weakened for the first time since May (58.6, -3.1 points).
EUROZONE / EU
PMIs offer encouraging growth prospects for H2, driven by the industrial sector. The composite index reached its highest level since May 2023 (51.1). The manufacturing index exceeded the expansion threshold for the first time in three years (50.5). Nevertheless, consumer confidence fell in August (flash estimate). Inflation remained stable at 2.0% in July. The second estimate of GDP for Q2 confirms growth of 0.1% q/q. Employment in the euro zone also rose by 0.1%. Industrial activity fell in June (-1.3% m/m and -0.3% q/q in Q2), but retail sales bounced back by 0.3% m/m, bringing the annual rate to its highest level since April 2022. Negotiated wages bounced back to 4.0% q/q in Q2 (+2.5% q/q in Q1). The ECB/EBA stress test, the results of which were published on 1 August, shows that the euro zone banking sector would be resilient to a severe economic downturn. The CET1 ratio for the banking system would stand at 12.0% at the end of the projection horizon (3 years) in the adverse scenario, 4 percentage points lower than its starting level. Their level of profitability provides banks with a strong capacity to cope with the increase in simulated losses.
- Germany: Growth slowed in the second quarter, but leading indicators point to an improvement. The German economy ultimately contracted by 0.3% q/q in Q2 2025. The slowdown was mainly due to lower investment and a negative contribution from foreign trade, while consumer spending increased. Year-on-year growth nevertheless stood at +0.2% thanks to a solid Q1. In July, inflation stood at 2% y/y, after 1.9% in June. Core inflation is stable at 2.7%. The flash composite PMI reached 50.9 in August, driven by manufacturing output (52.6). The flash services PMI fell to 50.1, while the manufacturing PMI reached 49.9, its highest level in more than three years. The Ifo indices for August and the Gfk indices for September will be published next week.
- France: Improvements in production and PMI, with stabilisation of the labour market and company insolvencies. Manufacturing output rose by 3.5% m/m in June, driven by an increase in aeronautics production. payroll employment remained stable in Q2 (after a drop of 0.1% q/q in Q1), as did the unemployment rate (at 7.5%). The basic monthly wage increased by 2% y/y in Q2 (compared with 2.1% in Q1). The composite PMI rose to 49.8 in August from 48.6 in July, driven by improvements in services (48.5 to 49.7) and manufacturing (48.2 to 49.9). The INSEE business climate index remained stable at 96 in August despite an improvement in construction (from 96 to 98, thanks to a rebound in housing activity), weighed down by the retail trade index (down from 99 to 92, with sales prospects declining) and the services index (from 96 to 95, with a deterioration in the accommodation and catering sector). The 12-month total number of company insolvencies stabilised in June for the second consecutive month, due to a slight decline in insolvencies in the construction and retail sectors. However, SME defaults continue to rise, up 20% y/y. The rate of new home loans remained stable in June 2025 for the third consecutive month (2.99%). New production excluding renegotiations (seasonally adjusted) stood at EUR 12.9 billion, its highest level since January 2023 (+33% year-on-year). However, new housing reservations declined in the second quarter of 2025, returning to their historic low of the fourth quarter of 2023.
- Southern Europe: Good news. In Italy, private sector activity improved in July (composite PMI at 51.5; +0.4 pts), driven by services (52.3; +1.2 pts). The manufacturing sector remains in contraction, although the PMI is at its highest level since March 2024 (49.8; +0.4 pts). Unemployment fell to 6.3% in June (-0.2pp m/m). Inflation remains low and slowed in July (+1.7%; -0.1pp). The core component is stable at 2.0%. In Spain, momentum continues. Private sector activity accelerated in July (composite PMI at its highest level in five months at 54.7; +2.6 pts m/m). The manufacturing sector grew for the third consecutive month (51.9; +0.5 pts) and activity in services accelerated further (55.1; +3.2 pts). Strong tourist demand is having a positive impact on activity, but also on inflation (inflation in services at +3.6% in July; +0.2pp m/m). This last figure pushed up the total harmonised measure (+2.7% y/y; +0.4 pts). Core inflation rose slightly at the same time (+2.6%; +0.1pp m/m).
UNITED KINGDOM
Activity is picking up, as is inflation. Q2 GDP surprised on the upside at +0.3% q/q, supported by inventories and public spending. However, consumption remains fragile (+0.1% q/q) and business investment is declining. The composite PMI reached 53 (+1.5 pts) in August, driven by services (+1.8 pts to 53.6), while the manufacturing index fell (-0.7 pts to 47.3). The CBI survey also indicates a decline in the index of new manufacturing orders in August. Inflation rose to 3.8% y/y in July, its highest level in 18 months, with an acceleration in services (5% y/y). In addition, basic wage growth remains strong at +5%. The average three-month unemployment rate reached 4.7% in June. payroll employment fell again in July, but the rate of decline slowed (-8,000). The recovery in the housing market is showing signs of slowing down, while the PMI in construction reached a post-Covid low of 44.3 in July. The Gfk household confidence index improved in August (+2 points to -17) thanks to better prospects for consumers' financial situations.
JAPAN
Robust growth and bond market pressure. GDP growth reached 0.3% in Q2, compared with +0.1% (revised) in Q1. Foreign trade was the main contributor, and the underlying momentum of domestic demand is positive. Inflation continues to exceed the target. In July, both the usual measure and the new measure of core inflation remained high, at +3.1% (-0.2pp) and +3.4% (+0.1pp) y/y respectively. Total inflation fell to +3.1% y/y (-0.2pp). In July, growth in production led to an improvement in the manufacturing PMI to 49.9 (+1.0pp), while the services PMI slowed (52.7, -0.9pp). Wage growth was still negative in June, although the result of -0.8% y/y was the “best” of 2025. Budget concerns, persistent inflation and expectations of rate hikes are pushing bond yields higher. As of 22 August, the 30-year yield stood at 3.23%, its highest level in several decades.
EMERGING ECONOMIES
Emerging Europe
Diverging growth and inflation performance in Q2: Poland continues to outperform with strong growth (0.8% q/q and 3.4% y/y), while inflation fell sharply in July (3.1% y/y) and is now within the Central Bank's target range (2.5% ±1%). In Romania, the rebound in GDP (+1.2% q/q; 0.3% y/y) should be interpreted with caution pending details as economic indicators have deteriorated. There was a sharp rebound in consumer prices in July (7.8% y/y vs. 5.7% in June) due to the removal of the cap on energy prices. Hungary returned to positive growth in Q2 (0.4% q/q and 0.1% y/y). Activity slowed in Slovakia (+0.1% q/q and +0.4% y/y) and the Czech Republic (+0.2% q/q and 2.4% y/y). In both countries, inflation slowed in July, while Turkey saw a re-acceleration in inflation (+2.1% vs. 1.4% in June) in line with the depreciation of the currency (-2% against the USD).
China
Activity indicators for July point to a slowdown in growth. Exports remained strong (+7.2% y/y), but industrial growth slowed (+5.7% y/y). Retail sales slowed (+3.7% y/y), the housing sector remained depressed (housing sales down -8.1% y/y), and the main components of investment weakened. The easing of economic policy following the Politburo meeting in July remained modest (with a few new measures to support households, such as child allowances and interest subsidies on consumer loans). Renewed focus on deflationary pressures. CPI inflation reached 0% y/y in July (vs. +0.1% in June). The authorities have signalled their intention to better regulate competitive practices (e.g. in the home delivery sector) and control increases in production capacity (e.g. in the steel and coal sectors).
India
Monetary status quo on 6 August. The central bank reported risks to economic activity linked to US tariffs. The fall in inflation continued (+1.6% y/y in July). Core inflation remained high but slowed in July (+4.1% y/y), and downward pressure on the rupee persisted due to capital outflows. Budget support: on 15 August, the government announced plans to lower and simplify VAT rates. The number of rates would be reduced from 5 to just 3 (5%, 18% and 40%). The automotive sector (VAT rate to fall from 28% to 18%) and durable consumer goods (rate from 12% to 5%) should benefit in particular. Sovereign rating upgraded by S&P to BBB on 14 August. S&P highlights strong growth, investments in infrastructure and consolidation of public finances.
ASEAN
Growth figures for Q2 are good, but recent indicators point to a slowdown. Indonesia: GDP growth of +5.1% y/y vs. +4.9% in Q2 driven by a sharp rise in exports, but recent indicators, particularly in industry, are weaker. Malaysia: GDP growth maintained at +4.4% y/y, supported by investment and household consumption; net exports contributed negatively to growth (sharp rise in imports). Thailand: Growth slowed to +2.8% y/y (+3.2% in Q1) and +0.6% q/q (+0.7% in Q1) due to a slowdown in agriculture, while activity picked up in industry alongside strong export growth in H1. Household consumption slowed, investment remained modest, and the number of tourists declined y/y in H1 2025. Easing of monetary policies. In Indonesia: despite a slight rise in inflation (+2.4% y/y in July vs. +1.9% in June), rates were cut in July and August (by 25 bp each time, down 100 bp since the start of the year). In Malaysia, rates were lowered (-25 bp) in July and disinflation continued (+1.1% in June). In Thailand, rates were also cut in July and August (-25 bp) and deflation persists (-0.7% y/y in July, in negative territory for the fourth consecutive month).
LATAM
Better-than-expected growth in Q2, cautious monetary easing. In Mexico, GDP grew by +1.2% y/y, but monthly data (PMI, exports, industrial production) do not point to such strong momentum. Inflation slowed in July (+3.5% y/y), and the central bank cut its key rate (-25 bp to 7.75% on 7 August). In Chile, growth reached +2.9% y/y in Q2, mainly driven by investment; the central bank lowered its key rate by 25 bp to 7.75% on 29 July (the first cut in 2025), with inflation remaining under control despite a rise in July. In Brazil, Colombia and Peru, the authorities kept their rates unchanged at their latest monetary policy meetings.
Gulf countries
Growth remains robust. In Saudi Arabia, it reached 3.9% in Q2 (vs. 3.4% in Q1), driven by the rebound in oil production and the solid performance of non-hydrocarbon activities (+4.7% in Q2). With unemployment at a record low and inflation at 2.1% in July, the outlook remains strong. For the UAE, PMIs declined in July but remain high (52.9). Strong figures for tourism and non-oil exports in H1 confirm the UAE's resilience.
